Solve various time value of money scenarios (Learning Objectives 3, 4)

1. Jeff just hit the jackpot in Las Vegas and won $25,000! If he invests it now at a 12% interest rate, how much will it be worth in 20 years?

2. Evan would like to have $2,000,000 saved by the time he retires in 40 years. How much does he need to invest now at a 10% interest rate to fund his retirement goal?

3. Assume that Stephanie accumulates savings of $1 million by the time she retires. If she invests this savings at 8%, how much money will she be able to withdraw at the end of each year for 20 years?

4. Katelyn plans to invest $2,000 at the end of each year for the next seven years. Assuming a 14% interest rate, what will her investment be worth seven years from now?

5. Assuming a 6% interest rate, how much would Danielle have to invest now to be able to withdraw $10,000 at the end of each year for the next nine years?

6. Jim is considering a capital investment that costs $485,000 and will provide the following net cash inflows:

Using a hurdle rate of 12%, find the NPV of the investment.
7.What is the IRR of the capital investment described in Question 6?

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Year Net Cash Inflow 1 $300,000 2 200,000 3 100,000